FXS: The British pound weakens against the dollar today
The US dollar strengthens further today after Consumer Spending rises in January. Consumer spending rises 0.5 percent, compared with the previous decline of 0.1 percent (revised data from a decline of 0.3 percent). Furthermore, retail sales excluding autos rises 0.6 percent from a previous decline of 0.2 percent. Increase in spending coupled with recent unemployment drop indicates that US economy is farther along in its recovery state, suggesting the Feds may tighten credit and increase interest rates sooner than projected.
The euro continues to slide against the majors on concerns that the European Union may fail to extend necessary measures in aid of Greece’s fiscal deficit. In the statement, following the EU summit in Brussel, EU leaders fails to set any concrete financial commitment to aid Greece, leading to a bearish outlook for euro. Furthermore, the high-yielding euro is hurt by China’s decision to raise bank reserve requirements and decrease lending. A week of negative market sentiment contributes to a further decline in the euro, depreciating to its lowest level of eight months against the greenback.
The British pound weakens against the dollar today, however staying within the week’s range of 1.5560 – 1.5740. There were few UK economic data released this week, but the market will be looking to GDP and Consumer Price Index data out next week for further indication of the Sterling’s direction.
The Japanese yen falls slightly against the dollar, hovering around 90.00. News from China’s decision to limit lending shook the currency market, however, the yen is holding up relatively well. Consumer confidence data came out favorable, at 39.4, up from the previous month of 37.9.
The Canadian dollar retraced from a three-week high against the dollar on China’s decision to slow lending by raising bank reserve requirements. As a commodity currency tied to economic growth, the Canadian dollar is hurt by the news. On a positive note, notable new car sales data for December is preventing the currency from greater declines. New motor vehicle sales increased 2.6 percent, much better than the expected 2 percent gain.
The Australian and New Zealand dollars falls today as China’s Central Bank decided to increase bank reserve requirements. Such measures lead the high-yielding Australian and New Zealand dollars to give up some of their gains from yesterday. Retail sales in New Zealand rose in the fourth quarter. However, retail trade data remains weak and unemployment continues to climb to its highest level in ten years.
